For quite some time now, just about every story about the housing market in the Valley of the Sun has been about prices going up, with almost no end in sight. But, recent numbers show that’s finally changing — a bit.
The median home price in the Valley has been going down this summer and could continue on that trajectory going forward. Why?
It has to do with classic supply and demand, and metro Phoenix realtor Camille Hartmetz says for the first time in a long time, it could just be a good time to buy.
Hartmetz joined The Show to talk more about it.
Full conversation
LAUREN GILGER: The overarching narrative here is that housing in the Valley has become pretty unaffordable. The prices seem to continue going up, coupled with interest rates that keep going up. But we’re seeing a little dip right now. What’s that look like?
CAMILLE HARTMETZ: Yes, so we’re down about 2.5% from just three months ago. We started to see a softening in buyer demand around April of this year. The causes of that were myriad, mostly it was unaffordability. It was rates combined with prices, and that’s a known quantity. People just felt like it was too expensive. The monthly payment was just unaffordable compared to the median income in Phoenix, for sure.
What we saw was a pullback in the marketplace, largely due to economic uncertainty, too. I think people started to feel like there was instability nationally, instability a little bit due to economic policies that were coming down that they weren’t quite sure about. Maybe a little bit uncertainty about the tariffs and just an uncertainty of what’s to come in Phoenix. “Are we buying at the height?” was the thing that I was asked most by buyers.
GILGER: So people are coming to you to buy a house and saying, “Should I wait? Are price going to go down?”
HARTMETZ: Right.
GILGER: So, they have gone down a little.
HARTMETZ: They have. … Not much. Only 2.5%, 3%, but that’s something. And, with rates coupling that effect — that positive effect for buyers — what you see is an affordability level that is releasing the demand onto the market.
So, we always have a demand scraping at the wall. We have 200 people a day moving here to Phoenix still. And those numbers create a demand in housing that is organic and is not going away. So, what happens is anytime you have an easing or a lessening in the unaffordability level, you see that demand whoosh in.
So when we started to feel that around May, June, July, the affordability was still really low. As soon as that started easing, where we saw prices keep declining, keep declining, now we’re at almost 3% for some ZIP Codes. And coupled with that interest rates going down, now buyers are interested. What’s the monthly payment like? What can I get in this ZIP Code or this neighborhood I’ve always wanted to live in?
GILGER: Is it in your opinion, though, actually any more affordable for folks?
HARTMETZ: It is. The data reflects that it is. We’re, we’re down from a height of, you know, above 7% in terms of interest rates. We’re in the mid-sixes for a mid-range FICO score, I believe. I just talked to a lender yesterday. And with the news today from the Fed, I think we’re going to see interest rates fall even more this year, hopefully. September should be the next rate reduction. We don’t know. It’s all speculative at this point.
But I think right now, what buyers can do if they’re savvy is they can start asking for concessions. If you need concessions, if you need rate buy downs, if you need help getting into your loan, if you need help closing the mortgage — this is the time to ask for them.
GILGER: Why?
HARTMETZ: Because it helps your affordability, it helps you to get into the loan, and there are loan packages that you can get through lenders that — I’m not an expert in lending — but it can help you get into an affordable rate, an affordable mortgage payment for the first two years, and then refi hopefully two years down the road.
Camille Hartmetz in the KJZZ studios in Tempe.
GILGER: Interesting. OK, so there’s some finagling you can do right now as a buyer. So are you seeing this reflected in your business? All of a sudden you’ve got a lot of people knocking on your door saying, “I want to buy, I want to buy, I want to buy”?
HARTMETZ: Yes, in the last couple of months I’ve had, I would say, five, six new buyers come on market. The first half of this year, my phone was silent in terms of buyer demand. And we see the numbers reflect that. About two-thirds of contracts right now in Maricopa County — in Phoenix metro, actually — have concessions in them.
GILGER: OK, so still a buyer’s market in a way?
HARTMETZ: It is a balanced market, depending on which market though. So, so if we take away the sweeping anecdotes about the whole market and look at just certain cities, Paradise Valley is an intensely strong seller’s market right now, for example. Glendale, Gilbert, Chandler, these are strong sellers’ markets. Phoenix was a buyer’s market up until about five weeks ago, and then we shifted to a balanced market. Because again, that demand is always there. So when affordability started going up, people said, “Oh, this is the time to buy.”
GILGER: This is the time. So, let me ask you about that. In different places in the Valley, what is it? It’s about demand. Is it about the base price in those neighborhoods? Is it about inventory?
HARTMETZ: It is about all those things. The main thing for Paradise Valley, for example, is that people with wealth are getting richer. In some cases, the houses that are selling for above $10 million are going like hotcakes. … That is the hottest performing segment of our marketplace for sure.
GILGER: My goodness.
HARTMETZ: If you remove those stats from our data, you find that the market is actually declining. When you keep those stats in metro Phoenix as a whole, our market appears to be increasing. But the truth is, if you look at like Phoenix, for example — just metro Phoenix — we are declining at a rate of about 2% per month.
GILGER: OK, so taking out that really high end $10 million buyer, what does the market look like right now in terms of affordability for those first-time home buyers who have had a heck of a time trying to get into this market for some years now?
HARTMETZ: It’s still rough, but there are programs available. The affordability is getting a little bit better. And things like a 1% down or 3% down or even 5% down mortgage are available, and lenders are trying to get people in. So, FHA is at a really good rate right now. VA has pretty good rates right now.
Conventional loans, it depends on how much you put down. And that’s really the barrier is how do you find that down payment? That’s the No. 1 thing that I think first-time buyers struggle with.
GILGER: Right, where do you get a big chunk of money to put into a house right now?
HARTMETZ: Right. So, entry is really still difficult unless you go with one of these programs with the lower amount down.
GILGER: Yeah, OK, so things buyers can do. What about the picture of the market as a whole? Are we looking at in the future this kind of trend continuing where we’re going to see it balance out a little, or is it going to continue to be prices go up and up and up?
HARTMETZ: I think we will see the trend will be a balanced market for the short term and the long term. So, what’s happening right now is year over year we are up in terms of inventory, but we are trending down. So, last year at the same time we had about 20,000, 19,000 active listings on the market. Right now we have about 24,000. We’re down from May, where we had 26,000. So you see us trending in the right direction.
GILGER: So it’s about how many houses are on the market. How do you explain that, I guess, considering you said how many people a day are moving to the Valley still?
HARTMETZ: Yeah, this is baffling. So I think people are choosing to rent, choosing to cohabitate in multiple family situations. I’m not sure how people are making it work out there, other than just seeing them get help from family if they have it or seeing them work two jobs. I know some people are even working three jobs to make it in the city right now. … Yeah, affordability is still really rough, but it’s trending in the right direction.
I think if you’re a buyer, if you are interested and have a little bit of down payment available, this is the time to buy up until about Dec. 31 or so. We’re going to see a bottom in values around that time. I think it’ll turn a corner, and in January of next year, maybe February, you’ll start to see those sale numbers come back up.
GILGER: Interesting. OK. So this is cyclical and seasonal a little bit, right? Like, isn’t summer usually a very slow season when it comes to buying houses?
HARTMETZ: It can be, but you’d be surprised. Actually, the graphs suggests that we are both seasonal but very much tied to rates. … Yeah, affordability is the No. 1 thing that impacts our demand, I think above even seasonality. Because people do leave town, but they’re still — if they need to buy in this market, they’re still looking when even when they’re up in Flagstaff.
They’re still — when they’re going out of town, they’re still searching on Zillow late at night. … The caveat is there an exception to that. Around the holidays, right between Oct. 31 and Dec. 31, we do see demand drop off precipitously in this marketplace. That’s why it’s an opportunity for those houses that are still on the market that are not receiving showings. If you’re a buyer, that’s an opportunity for you to go in and make a pretty decent offer for yourself.
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